Effect of Firm Characteristics and Corporate Governance Practices on Earnings Management: Evidence from Publicly Listed Property Sector Firms in the Philippines

Abstract

Two types of earnings management (EM), opportunistic and efficient motive, were presented in the literature. This article aimed to investigate the type of EM employed by publicly listed property sector firms in the Philippines. Furthermore, the study also examined the effect of firm characteristics and corporate governance practices on firm’s level of EM using discretionary accruals. In conducting this study, panel data econometric technique, particularly the ordinary least squares was used to determine which among the firm-specific characteristics (profitability, leverage, cash flows from operations and firm size) or corporate governance mechanisms (CEO duality, board size, board independence and audit quality) significantly influence publicly listed property sector firms’ EM activities using discretionary accruals. Results show that these firms employ efficient type of EM. Also, cash flows from operations, firm size and CEO duality are statistically significant predictors of EM for property firms. Except for cash flows from operations, these results contradict with prior studies when the same model was subjected for industrial firms. Such similarities and differences from previous studies warrant for further analysis on the peculiarities and intrinsic characteristics of the industrial and property sector in the Philippines. Such will point to certain policy frameworks in enabling EM to be harnessed in satisfying the firms’ bottom lines.

Impact of Corporate Governance, Audit Quality and Firm Characteristics on Firm Profitability using Earnings Quality as a Moderating Variable

“…This necessitates the implementation of internal controls to counteract threats, particularly in the pursuit of the organization's objectives. As a result, as a facet of organizational governance, CEO duality is likely to be favorably connected with the firm's earnings quality (Cudia et al, 2021).…”

“…The fifth multiple regression analysis was conducted in order to examine the impact of corporate governance and audit quality on firm profitability using earnings quality as a moderator variable in this model. Tables (11) and (12) show the summary of multiple regression results and variables coefficients. H05: There is no significant impact of corporate governance and audit quality using earnings quality as a moderator variable on profitability.…”

“…The operations that generate profit or financial advantage are given the highest priority in every commercial organization. As a result, managers go to great lengths to guarantee that the firm's operations are successful (Cudia et al, 2021). Earnings quality is an important aspect of financial reporting.…”

The impact of financial performance and firm characteristics on earnings management: Case of Tunisian Companies

“…Few studies examined directly the relationship between earning management and performance in developing economies. Others have introduced other variables related to firms' specificity (Souza et al, 2013;Cynthia et al, 2022;Mangala & Dhandal, 2019). They affirm that the relationship between earnings management and performance varies depending on the quality of managers and specific characteristics of firms.…”

Faktor-Faktor Yang Mempengaruhi Manajemen Laba Perusahaan Manufaktur

“…tata kelola perusahaan dapat meningkatkan kualitas pelaporan perusahaaan, memantau dan menegakkan persyaratan pengukapan kewajiban (Adhikary et al, 2021) Penelitian Rahmadani & Cahyonowati (2022); Thinh & Tan (2019) dan Suheny (2019) berpengaruh terhadap manajemen laba. Sedangkan Almalita (2018) dan Cudia et al, (2021) menyatakan bahwa tata kelola perusahaan tidak berpengaruh terhadap manajemen laba.…”